Market Update

There's only one time I think there are more games played in the market that have little to nothing to do with trends than morning trade and that is Monday morning trade. As mentioned earlier, those who do not trade full-time for a living look at the market overnight and place their limit orders/stops, etc. that they can't execute while at their normal job, the weekend just gives them more time to do this so Monday morning's tend to be even more deceptive as far as price action and its relevance goes than regular a.m. trade, but thus far (other than last week's head fake move that is interesting), there's not much of interest in the way of changes to short term analysis as summed up last night and previously at the EOD post late Friday afternoon.

I'll use the SPY as an example and follow up with the other averages and the VXX / VIX futures.

You'll notice a pattern through out the intraday charts of the averages, this is a carry over from Friday's EOD post, the point is not the 1 min chart, it's the more important 2-3 min charts which are what we are interested in with the EOD posts, again note the trend among all the averages (how similar they are all in this area).

SPY

 The first thing to note about today's action, other than being close to the top of the range from 8/14 and subsequently 8/26 which defined the upper boundary, is the very plain and obvious triangle formed thus far this morning.

Technical traders (whatever their current sentiment is, I suspect still bearish, but we'll have an update there soon) take a triangle like this with a preceding up trend (within the context of the timeframe) as a "Bullish consolidation/continuation pattern", the symmetrical triangle is one of the easiest, most common technical price patterns to spot; as such it makes for a great head fake pattern as traders have a strong expectation of an upside breakout leading to the next leg up.

It matters little whether retail is bullish or bearish in this case, they recognize the triangle for what it is, although many disregard the rules of technical analysis for symmetrical triangles as they have no inherent bias other than the trend that preceded them so many traders take the neutral sym. triangle (only the preceding trend determines its bias) and they assign their own biases to such triangles, unlike the bullish ascending triangle and bearish descending triangle (right angle triangles).

 This is the SPY 1 min chart within its trend, it's clearly negative, but when looking at intraday action we need to zoom in to an intraday view, however note there have been several significant distribution areas.

intraday the SPY is "almost" in line, although it's still in a relative negative divergence, however I probably don't need to remind you that the 1 min chart, while important for many reasons, is the weakest signal of all of the timeframes.

This is where the Friday EOD post really mattered and where you'll see a trend among the other averages, starting at the 2 min chart which I'd say is probably 2x more significant than the 1 min chart, so there are significant differences even among such similar timeframes.

 Note the leading negative divergence on the 3 min chart as well as a relative negative before that, however for early trade this week/today, the leading negative is the most important.

 This is a long term 60 min chart with the range defined with the support area at the white trend line and the resistance area at the red trendline. My expectation for the next truly significant trend is for a breakout above the range as you can see 3C is positive in the range showing it has been used to accumulate, but only at the lower end of the range where prices are lowest.

Very short term I expect prices to run back to the bottom of the range for likely the last time, this leaves a significant foot[tiny/base that can sustain a strong upside move, although that too is just another means to a larger end which is ultimately the largest trend and very bearish.

For the short term, a move to the lower end of the range should see accumulation and as such charts like this should see 3C move even higher, this would be the next significant area for long trades, although they would still be speculative. I'd also expect a head fake move (Break below the support of the range) just before price breaks out of the range to the upside.

While this area has been much less tradable, it reminds me of the range from August of 2011 to the Oct. 4th low that we traded with an 85% portfolio gain only using 2x leveraged ETFs, but what I'm referring to is how that choppy range which was chewing traders up left and right, but was one of our easiest pay days, was used for accumulation, the October low that we expected as a head fake stop run below the range gave birth to an enormously strong uptrend, this is a similar situation in that respect only and I would not use that time period as a model for future expectations, just concepts.

VXX-Short term VIX Futures

 The 1 min chart shows a small relative negative and in line trade today, this trades opposite the market in price and as such 3C signals should be opposite the market for confirmation, the fact both are in intraday confirmation is confirmation itself.

 The 2 min VXX chart with a relative positive divergence is confirmation of the SPY's 2 min negative.

 As is the 3 min positive

The 5 min leading positive shows that VXX is prepared for an upside move, if the market trades opposite the VXX, that means the same downside move expected from Friday's EOD post.

DIA- now the trends in 3C intraday timeframes should look similar to the SPY's above.

 DIA with a beautiful example of a head fake trade, this suggests a move to the upside as we have seen thus far, it's not large enough for a huge upside move or the one we are expecting as the next "SIGNIFICANT TREND", but it does have enough juice to offer the market a little more upside, that's why this morning's SPY triangle and potential for a false break out as well as a head fake move ABOVE the range are of interest.

However to sustain such a move, you need more than 1 min charts and even the DIA 1 min is not positive or in line.

 DIA 2 min neg. just like the SPy

3 min also negative like the SPY

The 5 min head fake move and a negative divergence

IWM with a small positive divergence late Friday and in line this morning

 However at 2 min it is negative like the SPY and DIA

3 min is the same

We shouldn't go out to 5 min for today's information as of yet, but it's fine for what has recently passed and as well as showing the accumulation of a head fake low, the recently leading negative divergence doesn't give the market much support, thus the opinion presented last night and Friday re: early trade this week that is in line with multiple timeframe analysis' expected trends.

 QQQ 1 min with a small late day positive divergence and in line in the area the triangle was being formed, I say was because as I type there's a small-ish upside move from the apex of the triangle

QQQ 2 min, the same trend as the SPY, DIA and QQQ as well as VXX.

3 min with the same trends including accumulation of the head fake low and distribution since.

While I expect a return to the bottom of the range where we will have high probability and low risk trade set ups so long as the charts keep confirming our expectations of accumulation in to the pullback, the most obvious thing o occur at this point intraday is for an initial upside breakout from the symmetrical triangle, I think it's there for a reason.

FOLLOWING OUR REVERSAL CONCEPTS, with price so close to the upper end of the range and an expectation for a return to the lower end of the range, a head fake break out or false breakout from the range would be the highest probability (around 80%) before a downside reversal to the lower end of the range. This is not just a probability, but a tactic that would help the market get to the lower end of the range as any longs who buy the breakout or shorts who cover on it will provide ample supply to send prices lower, THIS IS ALL EXPLAINED IN THE TWO ARTICLES I PUBLISHED AND LINKED ON THE MEMBER'S SITE, "Understanding the Head-
Fake Move"

While I can't say for sure yet because there are no strong 2, 3 min charts, the conceptual expectation would be a false breakout of the top of the range before a retreat lower, again though the intraday charts are so weak I normally wouldn't expect that to be a high probability unless retail took it there and the only way I see that happening in in short covering, once again the top of the SPX range.

SPY 60 min